A New Zealand woman carrying out a sophisticated fraud to the value of NZ$719,000 has been sentenced to 10 months’ home detention.
Former company director Sonia Klair was sentenced at the Auckland District Court after pleading guilty to 64 charges brought by the Commerce Commission under the Crimes Act, in relation to her running a business which engaged in false billing practices, also known as pro-forma invoicing.
This is the first time the Commission has brought charges under the Crimes Act. Previous prosecutions and resulting financial penalties imposed under the Fair Trading Act (FTA) had provided insufficient deterrence from such conduct.
Sonia admitted operating a scheme which involved sending “special offer” documents to recipients offering to “renew” online business directory listings with Klair’s company NZ Look Ltd (NZ Look), even though the recipients had no previous listing with that business.
NZ Look subsequently forwarded invoices, and in some cases debt recovery notices, seeking payment for services recipients had not agreed to acquire, or had agreed to acquire on the basis of a misrepresentation made to them.
Judge Field said that this was sophisticated offending which occurred over a substantial period of time. He said that Sonia saw an opportunity to make money and that her offending involved particular planning and preparation. The Judge considered Klair’s motivation for the offending was pure greed.
Between July 2008 and August 2010 the offending resulted in a total turnover of more than $719,000.
This type of “fake billing” is viewed seriously by enforcement agencies due to the significant financial gains that can be made by offenders and the consequent losses to New Zealand businesses.
In 2012 the Serious Fraud Office, NZ Police and Commerce Commission took a multi-agency approach with “Operation Edit” to target recidivist offenders who engage in this type of conduct.
Similar frauds by different groups have duped thousands of New Zealand businesses in the past few years, according to media reports. One such report by investigative programme Campbell Live (TV 3) reported one group may have duped companies to the tune of NZ$1 million.
The Commerce Commission’s Consumer Manager Stuart Wallace warned businesses to be wary of any unusual invoices they received and to ensure that they had good payment systems in place.
“To avoid being scammed it is important that all businesses, no matter what size, have an established system for approving invoices and make sure that all relevant staff know how it works.”
“That should give staff the confidence to ignore the pressure placed on them by people sending these false invoices. Some can be very pushy and persistent in their demands for payments which they have no legal right to receive,” said Stuart.
How to avoid pro forma invoices
Ask for proof that the advertisement was agreed to – no proof, no payment.
Verify the booking with colleagues.
Ask for specific evidence that the publishing company has been commissioned by an organization to publish the magazine on their behalf.
Keep records of telephone conversations discussing advertising, including date, what was discussed and who it was discussed with.
Have an advertising booking system in place and ensure all staff are aware of it.
Inform the company in writing that the advertisement they are charging you for was not authorized and will not be paid for.
Seek legal advice if threatened with legal action.
In the U.S. file a complaint with the Federal Trade Commission. In New Zealand, inform the Commerce Commission. (Source: Consumer Fraud Reporting)